Walmart plans to exit Japan with sale of its supermarket chain Seiyu

JAPAN- The US multinational retailer Walmart Inc. is looking to exit the Japanese market with the sale of its supermarket chain Seiyu for between US$2.7 billion and US$4.5 billion, Nikkei business daily reported without citing source of information.

The move comes in the middle of persistent deflation, competition and rising ecommerce from online retailers such as Amazon.com, with the Japan retailers being squeezed with convenience stores and discount drugstores in a sluggish consumption environment.

This could be part of the retail giant’s strategy to exit lower-growth end market as it looks to shake up its overseas business and invest in places like China and India.

According Nikkei, Walmart has approached major retailers and private equity funds about the possibility of a sale and potential buyers include local retailers and trading houses.

Competitive landscape

Walmart’s recent moves are geared towards countering Amazon, which has revamped its ecommerce platform as it turns to China and India as strategic markets while shrinking its operations in the U.K. and Brazil.

It purchased U.S. online retailer Jet.com for US$3 billion in 2016 with an aim to accelerate investment in digital retailing and reaping synergies with brick-and-mortar stores.

In 2012, Walmart acquired a majority stake in Shanghai-based online grocery retailer Yihaodian, backing up its internet shopping platforms in China.

This year, it invested US$16 billion in India’s Flipkart.

To strengthen its online operations in Japan, Walmart partnered with e-commerce company Rakuten in January with plans to open an online grocery service this summer.

Walmart formed a capital tie-up with Seiyu in 2002 to gain a foothold in Japan.

For the year ending in December 2016, the company business posted a net loss of US$177,360 and broke even the following year.

Walmart has struggled to replicate the success of its low-price model with Seiyu despite the introduction of an “everyday low price” pledge and frequent discounting.

Japan’s supermarket industry has proved difficult for foreign retail giants, with exits by Tesco in 2011 and Carrefour in 2005.

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